Archive for the ‘Sports Licenses’ Category

Are makers of video games required to take licenses from celebrities depicted in their games, or does the First Amendment shield them from the need to obtain permission and pay royalties?

The NCAA student-athlete legal free-for-all has generated two remarkably aligned federal appeals opinions that have brought a rare measure of uniformity to the generally disjointed case law on balancing rights of publicity protections for individuals against First amendment protections for creative expression.

The NCAA case has been very much in the headlines recently, but began five years ago as an antitrust case in which former college athletes sought to get a piece of the $20 billion a year in licensing revenue (from both television and official merchandise) received by the NCAA and its licensing agent, Collegiate Licensing Company. At that time, we noted it might be years before the case was resolved through final appeal. In fact, the first case has just finished trial.

Since 2009, the case has morphed into a class action involving potentially thousands of athletes. The issue made further headlines recently when sports superlawyer Jeffrey Kessler filed a new suit on behalf of a class of current college athletes, not to get a slice of the licensing revenues, but to blow up the entire NCAA “amateur student-athlete” system on antitrust grounds, and allow athletes to bargain for compensation while they are still students.

What escaped attention on most sports pages, however, were opinions late last year by the Third Circuit Court of Appeals in Philadelphia in the case of former Rutgers University quarterback Ryan Hart (Hart v. Electronic Arts, Inc.) and in the Ninth Circuit Court of Appeals in San Francisco in the case of former Nebraska University and Arizona State University quarterback Sam Keller (Keller v. Electronic Arts, Inc.), both against video game publisher Electronic Arts—not on antitrust grounds, but for using their personal and athletic performance information without a license, and thereby allegedly misappropriating their rights of publicity.

The former athletes both won their appeals, resulting in a proposed $60 million settlement with them and other former athletes —$40 million from EA and CLC, $20 million added by NCAA on the eve of the antitrust trial— and EA’s decision to shut down its franchise NCAA Football videogame series for at least 2015.

Both courts agreed with each other on multiple points regarding how to properly balance an individual’s rights of publicity versus an author’s First Amendment free-speech rights, a field in which up until now there has rarely been agreement or clarity.

The one Supreme Court case on this issue, Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562 (1977), held that a news broadcast of Hugo Zacchini’s entire “human cannonball” act without his consent when he appeared at a county fair was a misappropriation of his rights of publicity under Ohio law. The Court held that there must be a balance between the rights of individuals to control the economic exploitation of their names and images, protected by rights of publicity laws (currently recognized in about 40 states, depending on who is doing the counting), and the right of free expression, protected by the First Amendment to the federal Constitution. However, while ruling in favor of Zacchini that the television station had exceeded the bounds of First Amendment protection for the news media and was liable for misappropriation, the Court did not offer guidelines on how to strike that balance on a general basis. Lower courts have been formulating their own tests ever since.

Three of the leading tests are:

1) The Predominant Use Test holds that if the predominant purpose of a work is to exploit the commercial value of an individual’s identity, instead of to make an expressive comment about that individual, then the right of publicity claim will prevail over the First Amendment defense.

2) The Rogers Test was originally formulated in a case brought by movie actress Ginger Rogers, who sued the producers and distributors of Ginger and Fred, an Italian movie about nightclub dancers who were nicknamed after Ginger Rogers and Fred Astaire, on the grounds that the title of the movie infringed both her trademark and her rights of publicity. The Second Circuit Court of Appeals disagreed, holding that the First Amendment trumped Ms. Rogers’ rights of publicity because: (a) the use of her name in the title bore some relationship to the contents of the movie; and (b) the use of her name in the title was not a disguised advertisement for the sale of goods or services.

3) The Transformative Use Test was first formulated by the California Supreme Court in Comedy III Productions, Inc. v. Gary Saderup, Inc., 21 P.3d 797 (2001), in which the rights owner of the Three Stooges movie comedy team sued an artist for selling t-shirts and lithographs with photorealistic sketches of the Stooges. The court held that the artist had not added enough of his own original content to the portraits to be “transformative,” that is, to make it’s the artist’s own expression rather than a mere celebrity likeness, therefore the Stooges’ rights of publicity defeated the artist’s First Amendment defense.

The Third Circuit case was brought as a class action by Hart under the New Jersey statutory rights of publicity provision, while the Ninth Circuit case was brought by Keller and eight other former NCAA Division I football and basketball players under both California’s statutory and common law rights of publicity. The main defendant was video game publisher Electronic Arts, which was the producer of the NCAA Football video game series. Although EA had licensed the rights to use the NCAA and individual university trademarks for its video games, it had not licensed the rights of publicity from the college athletes. (According to a footnote in the Ninth Circuit case, Keller claimed that EA had specifically agreed in its NCAA license not to use athlete likenesses.)

Both courts substantially agreed on the facts of the case—that EA’s NCAA Football series seeks to replicate each university’s entire team roster as accurately as possible. Every player on a team has a corresponding avatar with the same jersey number, class year, height, weight, build, skin tone, hair color, home state, equipment modifications, and playing style. Player names are not written on the jerseys of the avatars, but can be added via third-party applications.

Promotional screen shot from EA’s NCAA Football 2014

In both cases, EA defended against claims of misappropriation of the players’ rights of publicity on the grounds that the video games were forms of expression protected by the First Amendment, under any of several legal theories, trumped the athletes’ rights of publicity, and therefore negated any need for a license from the athletes.

As a threshold issue, both courts agreed with EA that the video games are fully protected as expressive speech under the First Amendment.

The Third Circuit quickly rejected the Predominant Use Test advocated by EA on the grounds that it forced judges to become art critics who “analyze select elements of a work to determine how much they contribute to the entire work’s expressiveness.”

Both courts rejected employing the Rogers Test also advocated by EA because: 1) in prior case law, it had mainly been used in trademark infringement cases, but rarely been used in rights of publicity cases, and even then had primarily been applied when a celebrity’s name was used in a title of an expressive work, not in the body of the work itself; 2) application of the Rogers Test would almost always result in shielding the video game developer, because a video game in which a celebrity appears will almost always satisfy the Rogers Test criteria of being related in some degree to the celebrity; and 3) the test was derived from trademark law, where the primary concern is protecting the public from confusion about the source and quality of goods, not an appropriate focus for rights of publicity cases, where the focus should be on protecting a valuable intellectual property right of an individual— the commercial exploitation of his identity.

Both courts ultimately concluded that the Transformative Use Test was the appropriate balancing test. The Third Circuit felt it was more appropriate to rights of publicity cases because it was derived from the fair use defense in copyright law, which focuses on protection of individual intellectual property rights. In the context of the EA video games, both courts relied heavily on the case No Doubt vs. Activision Publishing, Inc., 192 Cal.App.4th 1018 (2011), in which the California Court of Appeals held that use of significant elements of identities of members of the pop music group No Doubt in the Band Hero video game was not a transformative use. Even though the game incorporated many creative elements in the performance environment for the members, such as performing in outer space or performing songs of rival bands, there was not a sufficient transformation of the avatars of the members, ruled the court. Likewise, concluded both the Third and Ninth Circuit panels, in the NCAA video games, EA’s use of player avatars with detailed literal biographical and appearance information was not transformed by the game’s ability to create different game environments. The athletes’ avatars were placed in the same context— playing football— as what they had become famous for, even though the game made it possible to change certain variables of that context. Further, the fact that the game allowed some degree of customization of the avatar did not change the equation—to rule otherwise would provide an easy out for game makers to capitalize on use of celebrity images, as long as they also built in an option to tweak the images.

In both cases, judges wrote dissenting opinions which argued that use of the Transformative Use Test as interpreted in No Doubt was not protective enough of First Amendment rights, and might result in imposing liability on authors of books, movies, and other creative works that incorporate historical figures, even if situated in a totally fictional environment.

Additionally, the Ninth Circuit addressed two non-First Amendment, California-specific defenses to rights of publicity claims. California law creates a defense against common law rights of publicity claims for the “publication of manners in the public interest,” and a defense against statutory rights of publicity claims “in connection with any news, public affairs, or sports broadcast or account, or any political account.” The court held that it was not necessary to weigh whether the video games were “in the public interest,” or were connected to news or sports broadcasts, because they failed the threshold requirement for both doctrines that they be in the nature of publishing or reporting. Instead, they were using the athletes’ personal information in the context of simulated games that had never occurred in the real world, so they were not “publications” or “reports.”

The court then addressed one of the toughest issues in a footnote at end of its opinion. It attempted to distinguish several cases from outside California in which courts ruled that the First Amendment trumped rights of publicity claims for fantasy sports leagues that publish player names and publicly available performance statistics, so that the leagues were not required to obtain licenses from the athletes. The NCAA case is different argued the Ninth Circuit, because EA’s creation of non-publicly available virtual avatars using player identifying information did derive from the athletes’ “identities,” and were not merely public domain statistical information. While this distinction may “feel” right, the “mere statistics” versus “statistics plus specially created avatars” distinction is a very thin dividing line, and will likely be litigated in the future.

Takeaway: once limited to California cases, the Transformative Use Test is gathering endorsements from an increasing number of appellate courts, when it is necessary to balance the rights of individuals to protect their rights of publicity from exploitation by others versus the First Amendment right protections of creative expression, and especially in the context of use of celebrity avatars in video games. But rights of publicity are grounded in diverse state laws, so that even when the applicable balancing test is settled, it is notoriously difficult to predict in advance whether a court will find a particular rendering sufficiently transformative, so caution remains in order for use of celebrity likenesses without a license.

If an artist depicts a trademark in his work, is it art or trademark infringement?

In a case that has already been in litigation for five years, a federal trial judge has ruled in University of Alabama vs. New Life Art, Inc. that artist Daniel A. Moore infringed the University of Alabama’s trademarks when he sold paintings, posters, mugs, calendars, and other Bama sports memorabilia, but also ruled that the paintings and posters were nevertheless exempt as artistic expressions protected under the First Amendment.

Moore has estimated that his football art tallied sales “in the low millions,” during his 30 year career. From 1991 until 2000, Moore’s company New Life Art, Inc. had a license agreement under which it paid royalties to the University of Alabama, but then Moore insisted that the law did not require his paintings to be licensed, especially when his posters in most cases depicted no explicit trademark material.

Not so, replied the University of Alabama, arguing that all of Moore’s artwork at least portrayed Bama’s famous crimson and white “Crimson Tide” team colors, which the University argued is its trade dress –packaging that identifies University of Alabama sports products and services in the public mind– and that Moore’s depiction of it would likely mislead the consuming public into thinking his paintings were manufactured, sponsored, endorsed, or affiliated with the University.

Judge Robert Propst agreed that Bama’s team colors had attained trade dress status, and that there was some, albeit small, likelihood that the public would be confused as to the University’s creation or sponsorship of Moore’s art.

However, he ruled that at least as regards his large scale paintings and posters, Moore’s work had “high artistic skill” and expressive content; his use of the Bama colors had artistic relevance to his work, and did not intentionally mislead the public as to the University’s sponsorship or affiliation with it; therefore it was protected by the First Amendment, which superseded the University’s trademark infringement claims made under the Lanham Act.

The mugs, calendars, and other souvenir paraphernalia did not contain significant artistic content and therefore were held to be infringing.

As support, the judge quoted at length from another famous sports art case, ETW Corp. vs. Jireh Publishing, Inc., in which the Sixth Circuit Court Of Appeals held that an artist’s limited edition poster portraying Tiger Woods’ historic first Masters golf tournament championship was not an infringement of Woods’ trademarks in his name and images, because some of Woods’ claimed trademarks were not actually trademarks at all, while the use of other trademarks was either de minimus or protected by the artist’s exercise of his First Amendment rights.

Even if Moore ultimately prevails, it is unlikely that there will be a huge economic impact on university sports licensing. Both Moore’s paintings and the Tiger Woods posters were not mass-market items, but more of the “limited edition/collectors item” variety, with high artistic skill and a relatively high price tag. However, Bama and other big sports universities are playing to win.

An antitrust lawsuit brought by a former UCLA basketball star has the potential to upend the cozy, lucrative world of collegiate sports licensing, and even to make fundamental changes to the amateur nature of college sports.

Collegiate licensing is a $4 billion a year industry, about 80% of which is handled by the Collegiate Licensing Company (“CLC”), official licensing agent to the NCAA and over 200 universities.

One of the foundations of that industry is that college athletes are required to sign documents that relinquish in perpetuity their rights of publicity for college sports-related purposes, as a condition of participating in NCAA-sponsored college athletics. That means the NCAA can, without compensation to the athletes, license their names and images for apparel, video games, broadcasts, and highlight DVDs, long after they have graduated from college.

Ed O’Bannon, a former basketball star at UCLA during the 1990s, said he got angry seeing his highlight clips from 15 years ago being used to promote NCAA broadcasts, so last July he filed a class action lawsuit against the NCAA and CLC in federal District Court in San Francisco on behalf of himself and other former student-athletes.

The nub of O’Bannon’s legal argument is that requiring student athletes to sign away their rights of publicity in perpetuity is a violation of Section 1 of the Sherman Antitrust Act. Section 1 prohibits, “Every contract, combination…, or conspiracy, in restraint of trade or commerce among the several States….”

Agreements among the NCAA, CLC, and NCAA member universities, as well as the students’ relinquishments of their rights of publicity, are obviously “contracts,” so the next question under Section 1 is whether these contracts unreasonably restrain trade in a particular market. The NCAA will probably argue that: 1) the former athletes should not be able to bring an antitrust lawsuit in the first place, because they validly traded their rights of publicity for room, board, and tuition provided under their athletic scholarships; and 2) prohibiting college athletes from receiving payments for their athletic skills preserves the amateur nature of the college game, and therefore promotes, not restrains, competition in the market for college sports and sports products.

O’Bannon is likely to reply that: 1) requiring a college freshman to sign away his intellectual property rights in perpetuity without the presence of an attorney is invalid; and 2) assuming that amateurism by college athletes increases competition in the market for college sports, it is totally irrelevant to former athletes, who are no longer playing in games. O’Bannon argues that the NCAA, by prohibiting the former student-athletes from cutting their own apparel or video game licensing deals, is lessening competition, decreasing innovation, eliminating compensation to former athletes, and increasing prices to college sports fans, in violation of the Sherman Antitrust Act.

Indeed, by limiting their lawsuit to former students, the O’Bannon plaintiffs have considerably strengthened the legal arguments of their case.

The O’Bannon plaintiffs recently survived the defendants’ motion to dismiss the case before trial, but there is plenty of game left to play, sports fans. With so much money at stake, it is likely that no matter which side wins, there will be years of appeals before the matter is finally settled.

But if O’Bannon wins, the NCAA, CLC, and many college athletic departments could take a large financial hit. They all derive substantial revenue from that $4 billion in licensing fees, but the O’Bannon plaintiffs would claim a major (as yet unspecified) chunk as compensation to former student-athletes whose rights of publicity were utilized in licensing deals. In fact, antitrust law allows victorious plaintiffs to triple their damages. And of course the former college athletes would have the right to cut their own licensing deals going forward, independent of the NCAA and their alma maters.

Furthermore, if O’Bannon wins, it is possible that current college athletes might utilize the rationale in any O’Bannon victory to attempt to weaken or throw out the current system of signing their rights of publicity over to the NCAA and CLC. For example, if the court were to rule the waivers were defective because the NCAA failed to advise students that they should seek legal counsel before signing away rights to future compensation for their intellectual property, then current athletes might argue they too should have the right to be represented by counsel in negotiating rights waivers during their college playing careers. Then star college athletes could get embroiled in contract negotiations, just like professional athletes.

Here is an oldie but goodie from the worlds of sports licensing, which again reminds us that IP assignment agreements are not just for the rarefied world of lab researchers, but for the nitty gritty worlds of tattoo artists and technical foul prone power fowards as well.

Back when he was playing for the Portland Trail Blazers, basketball star Rasheed Wallace got an elaborate tattoo on his upper right arm depicting an ancient Egyptian royal family with the sun in the background (see photos here and here). For a fee of $450, Portland tattoo artist Matthew Reed created preliminary sketches of the tattoo for Wallace’s approval, then applied ink and needle to skin. Reed and Wallace signed a one page contract, but it was silent on who owned the intellectual property in the tattoo.

Wallace appeared in a Nike television commercial which focused on the tattoo in close up, and included an animation simulating the tattoo’s creation, with voiceover from Wallace explaining the meaning of the symbols.

Reed, surprised that his $450 creation was the focus of a multimillion dollar advertising campaign, sued Wallace, Nike, and its advertising agency for infringement of his copyright.

Why? How?

A person who creates intellectual property as an independent contractor generally owns that IP, in the absence of an agreement to the contrary. As mentioned, the contract between Reed and Wallace was silent on the issue of copyright ownership, so it could not be considered an assignment of copyright, and the tattoo did not fit one of the work made for hire categories, so it could not be considered a work made for hire. Since Reed was an independent contractor, the ownership of the copyright in the tattoo remained with him. Which meant that anyone who reproduced the tattoo without a license from Reed was infringing his copyright.

The lawsuit was settled confidentially, but it is likely that Reed walked away with a lot more than the original $450 fee.

So what rights did Wallace get for his $450? Wallace owns the physical manifestation of the tattoo, and has the right to display it to people in the same physical location, but has no right to make or sell reproductions, such as photographs or video, or to create derivative works, such as animations based on the tattoo. Similarly, the purchaser of a painting who does not obtain an assignment of copyright from the painter owns the canvas, and implicitly has the right to sell the original canvas or even destroy it, but does not have the right to make or sell copies of the painting on the canvas.

And it probably would not have helped Wallace’s case even if he proved that he conceived of the “idea” for the tattoo, because copyright does not protect ideas or concepts (e.g. the concept of an Egyptian royal family and a sun), only the expression of those ideas (e.g. an actual image of an Egyptian royal family and a sun).

Takeaway: when purchasing artwork, video, text, or other creative works that you may wish to make available to a broader audience, make sure that you have a written agreement with the seller/licensor either transferring ownership of the copyright to you, or licensing reproduction rights to you (coupled with a guarantee that he is indeed authorized to license those rights to you). Otherwise, you could get “tattooed” like Rasheed Wallace.